The Distress Wave Finally Arrives at Lenders’ Doorstep
June rate-cut odds climbed as consumer confidence cracked, 100% bonus depreciation moved back into the policy conversation, Sunbelt concessions widened, and multifamily distress hit a 12-year high. Here’s how we’re positioning into the spring transaction season.
February delivered exactly the kind of data the market has been waiting for. The Fed remains on pause, but consumer sentiment turned sharply enough that traders are now pricing meaningful odds of a June cut. Distress is broadening, concessions in the highest-supply Sunbelt metros are deepening, and the next wave of forced sellers is taking shape. None of it is dramatic in a single data point. Read together, the picture is sharper than it was thirty days ago.
Rate-Cut Speculation Builds on Softer Consumer Data
Treasury yields softened modestly through February as macro data weakened. Reuters reported[1] that the Conference Board’s consumer confidence index fell at its sharpest pace in three and a half years, while consumers’ average inflation expectations jumped to 6%, the highest reading since May 2023. Interest-rate futures are now pricing better than 70% odds of a quarter-point cut in June, with another likely in September.
For our underwriting, we treat this as helpful at the margin but not as a basis for repricing acquisitions. Lenders remain selective and continue to prioritize well-capitalized sponsors and conservative underwriting; the cost of debt today is what matters for whether a deal pencils, not the cost of debt the market hopes for in five months. We’re continuing to underwrite to today’s rates and use any rate relief, when it arrives, as upside.
100% Bonus Depreciation: Back on the Table
Momentum has built behind restoring 100% bonus depreciation[2], which began phasing out in 2023. If reinstated, the change would meaningfully improve after-tax cash flow on value-add multifamily by accelerating cost-segregation deductions in the year of acquisition. The TCJA pass-through deduction and the Opportunity Zone program are part of the same policy package working through Congress.
For our acquisitions strategy this matters because cost segregation is a real and underwritten lever in our value-add returns. We are not modeling reinstatement into our base case—we don’t underwrite to tax policy that hasn’t passed—but if it goes through, it adds visible upside to deals already in our pipeline.
Southeast Rents: Signs of Stabilization Amid Heavy Supply
The Southeastern multifamily market has spent the past 18 months absorbing record deliveries. February data offered the first credible signal that the bottom may be in. Multifamily Dive reported that MAA, the largest Sunbelt apartment REIT[3], saw new-lease pricing decline moderate in January versus December and the full fourth quarter, even as concessions in Austin, Atlanta, and Charlotte remained elevated. Secondary markets like Richmond, Charleston, and Greenville continue to outperform their larger neighbors because fewer deliveries have hit the ground.
Primary metros are still working through supply. Secondary markets are where the rent-growth story is already inflecting.
The signal we take from this is that the “Sunbelt” cannot be underwritten as a single market. Austin and Charlotte will take longer than Greensboro and Birmingham. Our value-add pipeline is concentrated in markets where deliveries have already peaked and renter demand remains durable.
New Construction: The Pipeline Keeps Shrinking
Construction starts continued to fall in early 2025, with NAHB projecting a further decline in the first half of the year before multifamily stabilizes toward year-end[4]. The drivers haven’t changed: elevated construction costs, persistent financing friction, and insurance premiums that continue to surprise to the upside. The under-construction backlog remains the largest in five decades, but the forward pipeline is thinning fast.
For our acquisitions strategy this means we are increasingly buying into a setup where existing assets trade at meaningful discounts to replacement cost while the supply spigot tightens. Underperforming properties in strong submarkets are exactly the profile we’re built to acquire and reposition.
Distress: Forced Sales Are Coming
CRED iQ data via Multifamily Dive[5] showed multifamily distress climbing another 40 basis points to 13% in January, with February adding another 10 basis points. A year earlier, the rate was 2.6%. The “extend and pretend” strategy is running out of room as more 2025 maturities approach and rate relief continues to slip.
The signal we take from this is that the off-market opportunity set we’ve been building toward is starting to materialize. We are actively engaged with brokers, special servicers, and regional lenders to source assets where motivated sellers are seeking liquidity. Our disciplined underwriting ensures we capture distress only where the fundamentals are sound and the discount to intrinsic value is real.
What’s New at Oakdale Capital
Pipeline. We are actively underwriting multifamily acquisitions across Lexington, Louisville, Birmingham, Greensboro, Knoxville, and Indianapolis. These markets share three things we look for: durable employment growth, manageable supply pressure, and a buyer pool that has thinned more than the underlying demand justifies. Expect specific deal announcements in the coming months.
NMHC follow-up. Sentiment in February remains in line with what we heard at the NMHC Annual Meeting in January: cautious optimism, ample dry powder, and continued pricing discovery as sellers adjust. Competition for high-quality assets is still meaningful, but the bid-ask gap is closing fastest in 1970s–1980s vintage where the buyer pool has narrowed.
Capital is still available; it is just more discriminating. That favors sponsors who can move with clarity and bring credible equity.
Oakdale GP Fund.
Our capital raise continues to progress well. The Fund’s differentiated structure—passive participation with GP-style upside—is resonating with investors who want exposure to the next stage of the cycle without operating a portfolio themselves. The strategy remains focused on stabilized and value-add assets in resilient Midwestern and Southeastern markets. Please reach out if you’d like the updated GP Fund Summary.
Closing Thought
February sharpened our view that 2025 is going to be a year of selective opportunity rather than a broad reset. Rate relief is coming, but not until midyear. Supply is tightening, but unevenly. Distress is rising, but most acutely in older assets and overlevered capital stacks. Our job is to acquire well, underwrite conservatively, and bring patient capital to a market where patience is finally being rewarded.
As always, please reach out with any questions or to discuss what we’re seeing in our active markets.
Will Thompson
Founder & CEO, Oakdale Capital
Sources
Reuters via KFGO, “Fed seen resuming rate cuts in June as consumer confidence takes a dive,” February 25, 2025. kfgo.com
Trout CPA, “What a Second Trump Term Could Mean for Real Estate and Taxes,” 2025. troutcpa.com
Multifamily Dive, “MAA sees concessions in Austin, Atlanta and Charlotte,” February 2025. multifamilydive.com
NAHB, “Multifamily Market to Stabilize Toward the End of 2025,” February 2025. nahb.org
Multifamily Dive, “Multifamily distress jumps 40 basis points to 13%,” February 2025 — CRED iQ data. multifamilydive.com
